Why Win Rate Lies
Trader A wins 70% of trades. Trader B wins 40%. Who makes more money?
Most people say Trader A. They're wrong. The answer depends on how big the wins are vs. the losses. A 70% win rate with $100 wins and $300 losses is a losing strategy. A 40% win rate with $400 wins and $100 losses is a printing-money strategy.
Win rate alone tells you nothing. The metric that matters is R.
What R Is
R = the dollars you risk on a trade. Calculate: (Entry − Stop) × Shares = 1R.
Every outcome gets measured in multiples of R. Stop hit = -1R. Target hit = +2R or +3R depending on how far the target was. Half-target = +1R.
Worked Example
Buy at $400, stop at $385, 10 shares.
1R = ($400 − $385) × 10 = $150
Stops out: -$150 = -1R
Sells at $445: +$450 = +3R
Sells at $415: +$150 = +1R